Marijuana taxes in Colorado could exceed 30 percent

Apr. 5, 2013

Written by

Kristen Wyatt

Associated Press

DENVER — A legislative panel decided Friday that marijuana in Colorado could be taxed at rates above 30 percent. But voters would have to OK the taxes, and some lawmakers fear the state’s tax-skeptical public could reject such high rates.

A House-Senate panel set up to propose marijuana regulations agreed to ask voters to approve a 15 percent excise tax, plus a 15 percent sales tax on the newly legal drug. If the full Legislature agrees, voters would be asked about the taxes in November. Commercial pot sales begin in January.

The panel’s other big decisions included recommending a ban on radio and TV advertising by pot businesses, and suggesting limits on the amount of pot that out-of-state visitors can buy.

Regarding taxes, the first $40 million of the excise tax would go to school construction, something voters dictated last year when they chose to flout federal drug law and allow adults older than 21 to use pot.

The sales taxes would be used to pay for enforcing marijuana regulations, ranging from rules about who can be in the pot business to controls on how pot is grown and limits on how pot shops can advertise. Sales taxes would also pay for educational efforts about the potential health dangers of marijuana use. The 15 percent marijuana sales taxes would be in addition to the statewide 2.9 percent sales tax and any additional local sales taxes.

Some lawmakers on the marijuana committee feared that Coloradans would reject one or both tax measures, leaving the state with a hefty tab for enforcing pot sales but little cash to pay for it. Colorado’s Taxpayers’ Bill of Rights requires the public to OK tax hikes, and Coloradans have been known to reject taxes even for popular state services, such as K-12 education.

Republican Rep. Brian DelGrosso said many who voted to make marijuana legal did so because of the potential taxes it could raise for schools. But he worried that even tax fans could pause at taxes in excess of 30 percent.

“We could potentially be setting ourselves up for failure at the ballot,” DelGrosso warned.

(Page 2 of 2)

But most of the panel agreed with the tax rates, pointing out that the Legislature could lower them later. The tax measure passed 8-2.

Taxes were just the beginning of the decisions made Friday by the marijuana committee. Among the other recommendations:

Pot purchases by out-of-state visitors would be capped at an eighth of an ounce in a single transaction. Residents could buy a quarter of an ounce at a time. There would be no daily limits, though adults older than 21 are limited to a total possession of 1 ounce.

• Lawmakers set potency limits for edible marijuana products — at 100 milligrams of THC, the psychoactive ingredient in pot.

• Lawmakers set a loose definition for where pot could be used. Colorado’s marijuana amendment bans using the drug “openly” or “publicly,” but the definition would permit private pot clubs and smoking openly on a private porch or back deck. The definition wouldn’t allow marijuana cafes or bars that are open to the public.

• Marijuana shops couldn’t serve both medical and recreational pot customers in the same location. That’s because recreational pot stores will have to ban people younger than 21, though some younger people have medical permission to use the drug.

• All pot, smokable or edible, would have to be labeled for potency, measured by THC content. Pot would come with a warning that the product hasn’t been inspected for safety. Pot packages will have to contain a universal symbol, likely a green leaf, to indicate the package contains marijuana.

• Edible pot would have to be refrigerated if it’s something that could spoil.

• No radio or TV advertising by marijuana businesses will be allowed.

• People convicted of a drug felony will face a 10-year ban on working in the marijuana business. That’s a reduction from the initial proposal, which called for a lifetime ban on drug felons. Some lawmakers complained the lifetime ban would make pot more stringently regulated than alcohol.

• Lawmakers rejected a proposal first announced Thursday, to require local governments to hold public hearings on the locations of pot businesses before granting licenses. The proposal was intended to address a major complaint of the state’s current medical marijuana industry — that neighbors sometimes don’t know when a pot shop is moving in. Lawmakers rejected the requirement, saying local governments should be free to decide whether to require neighborhood hearings.

The marijuana committee concludes work Monday. Lawmakers still have to decide a contentious item, whether pot sellers should have to grow most of their product. The question is hotly debated within the marijuana industry. Current medical marijuana law requires pot shops to grow 70 percent of the product they sell, but some complain that requirement is too expensive to enforce and unfairly limits competition.